7 & 8 real peoperty aprraisal & imvestments income tact & estates

What is an estimate Or opinion of value, as of a certain date supported by objective data

And appraisal

An appraisal is not

Prediction, future worth inspection of property determining what someone will pay. It does not establish the value and it does not guarantee that the property is free of defects.

Value is defined in three ways

The relationship of desired object

Power of a good service to command other good service services in

Present worth of a future benefit arising from property ownership

True or false

True

For components of value

(DUST)

Demand

Utility

Scarcity

Transferability

The difference between objective value and subjective value

Objective value is created by the object itself, such as the cost to create

Subjective is created by opinion

The difference between market value and market price

Market value is the amount a willing buyer would pay in a seller would accept

Market price is the actual amount of money paid for the property in a transaction

Difference between market price and cost

Market price is the actual amount of money paid for a property and a transaction

Cost is the amount of money required to construct a building at today

The difference between arms length transaction, and non-arm’s-length transaction

Arms length transaction is one in which parties are dealing from equal bargain

Non-arm’s-length transaction includes foreclosure sales between relatives and condemnation proceedings

The amount a lender will land using property as collateral is what type of value

Full cash value

Cost

Loan/mortgage

Loan/mortgage

The value of a physical item subject to loss due to fire or hazard

Insurance value

Salvage/residual value

Insurance value

The value for property tax purpose

Cost

Full cash value, and assessment value

Full cash value in assessment value is the value of the property tax purpose

The value of our property at the end of its physical life

Full cash value

Insurance value

Salvage or residual value

Salvador residual value is the value of a property at the end of it’s physical life

The economic principles of value

Principle of supplying demand is The value affected by scarcity of a product and

What happens when Supply exceeds demand in when demand exceed Supply?

when supply exceeds demand prices fall

When demand exceed Supply prices rise

The principle of highest and best use is the use of property which will produce the greatest net return

Property has one highest best use of any time true or false

True

The best use on net income, take zoning building codes, permit use and surrounding market conditions into account

True or false

True

What principle UsesMax value of property taxes to be set how much it cost to equally desirable property. This is used in all three appraisal methods.

Principal of anticipation

Principle of substitution

Principle of progression

Principle of substitution uses the max value of the property taxes to best set how much it cost with equal equally desirable properties

The principle of regression is the presence of lesser properties adversely affecting the value of the greater property

What is the principle of progression?

Since the principle of regression is the PRESENCE of lesser properties adversely affecting the value of the greater property

The principle of progression is the VALUE of lesser properties is used to enhance the presence of the greater property

The value of an item or improvement is measured by how much it contributes to the hole, not equal to what the buyers are willing to pay for not what it cost the owner to install or construct

This is the principle of

Externalities

Progression

Contribution

The principle of contribution is the value of the item or improvement

The principle of externalities are factors outside of the property can have a positive or negative effect on value

True or false

True

The placement of a building on its site in relation to the sun and prevailing winds along With consideration for privacy and views is referring to the principle

Orientation

Externalities

Contribution

Orientation

Areas towards which a community is growing, influenced by numerous economic factors is referring to the principle of

Directional growth

Orientation

Progression

Directional growth, or areas towards which community is growing influenced by numerous economic factors

An increase of value for any reason is considered

Appreciation

The difference between earned increment and unearned increment

Earned increment is the increase in value due to some effect of the owner such as remodeling the property or it’s improvement

Unearned increment is the increase of value through no effort of the owner like positive zoning changes in inflation population, increase or increase in demand and reduction of supply

Increase in value by bringing small parcels under one ownership is called

Earned increment

Plottage/assemblage

Plottage/assembly is the increase in value by bringing small parcels under one owner

Any loss in value for any reason is called

Depreciation

Deterioration is A loss and value due to physical wear and tear examples are

Deferred maintenance, termites, weather damage leaky roof cracked paint typically curable

Functional obsolescence versus economic/eternal obsolescence

Functional obsolescence Lost in value from causes inside the property limiting vitality

• How do features older bathrooms, kitchens floor plan or design= incurable

Economic, eternal obsolescence Is a loss in value due to factors outside of the property and usually incurable

• Neighborhood condition loss of employment in the area, error and noise, pollution negative legislative changes, adverse zoning, change changes

Changes and market condition neighborhood conditions, loss of employment in the area. Noise in air pollution is an example of economic or functional obsolescence.

Economic obsolescence, which is the loss of the valued factors outside of the property and usually is incurable

Outdated features, older bathrooms, kitchen, small closets, poor floor plan and design can be curable or incurable is an example of functional obsolescence or economic obsolescence

Functional obsolescence is a loss value from the causes of inside the property limiting the vitality

what is the residential appraisal report for reporting and analysis of single-family dwelling?

URAR

Universal residential appraisal report

The difference between the uniform residential appraisal report and a narrative appraisal report is

Narrative appraisal report is presented in a descriptive paragraphs as opposed to an appraisal presented in form of or tablet format

Narrative appraisal report reports are typically used in commercial property

What type of appraisal report is typically used in commercial property?

Narrative appraisal report

A hybrid appraisal is

(3 Option)

Drive-by appraisal, which is an exterior inspection

Desktop appraisal without physical inspection, data ready available from tax and multiple listing data

Automated value model AVM appraisal is based on mathematical algorithms, combined with database

What is the exterior inspection called in regards to appraisal?

Drive-by appraisal

An appraisal without a physical inspection Data is readily available from tax and multiple listings data

Desktop appraisal

Automated evaluation model AVM appraisal is based on what

A mathematical algorithm combined with a database

CMA competitive market analysis is the current market conditions used to help consumers determine the list price sales price and purchase price. This is done by who

Real estate agent evaluation, they do the competitive market analysis they cannot give opinion of value

BPO broker price opinion is an appraisal prepared by who for the lender who is considering a short sale for closure or a HELOC

BPO broker price opinion is prepared by the broker/sales person for the lender who’s considering a short sale foreclosure or HELOC

BPO is not called an appraisal

True or False

True

The department of insurance and financial institution grants licenses to appraisers true or false

True

The final step in an appraisal process is called

Reconciliation of data

Market data or direct sales comparison approach used to estimate the value by comparing is called

The comparison approach

What is the minimum of comparable properties needed for an appraisal made at arms length

Minimum of three properties for comparable

The rules for adjusting property:

Subject property is reference point never adjusted

Subject is better than comparable. Add dollars to comps for the sales price.

Comp is better than subject and subtract dollars from the sales price

The comparison approach is relied on heavily and appraising true or false

True

The cost approach is called the summation method which is an appraisal approach, and which the cost of the building the structure brand new is calculated appreciation is subtracted in the land value is added

What is the formula?

Building cost- Depreciation+ Land value=

Appraised value

In regards to building costs what is the difference between replacement cost and reproduction cost?

Replacement cost is what the cost is to produce reasonable function equivalent in today’s price

The reproduction cost is the cost to produce the exact same replica

The building cost is estimated by publications that Supply current construction cost for different regions of the country based on the building square footage

True or false

True

When determining the building cost determined by measuring the exterior dimensions of the building calculating the area. This does not include areas that Are not heated nor cooled like the garage or carports

True or false

True

The loss of value of improvements for any reason and is the most difficult to estimate is called

Depreciation

Land value is estimated through what approach

Comparison approach

When determining the value of a one-of-a-kind property with no comps such as a church or municipal building or new construction, what type of approach is used?

Comparison approach

Cost approach

Cost approach

This approach assumes a future rights to income derived from property. It’s used for properties that produce income through rents.

Cost approach

Comparison approach

Income/capitalization approach

Income/capitalization

The process of converting net income into value is called

Capitalization

Economic life

Potential gross income

Capitalization is a process of converting net income into value

The period of time or your property will produce income -economically beneficial

Capitalization

Economic life

Potential gross income

The economic life is a period of time where property will produce income

All rents a property could produce a market value with no vacancy is referring to

Potential gross income

Capitalization

Potential gross income is referring to all rents of property could produce a market value with no vacancy

All income sources actually received after vacancies and credit loss is

Net income

Effective gross income

Capitalization rate

Effective gross income is all income sources actually received after vacancies and credit losses

Income remaining after operating expenses and vacancy or collection losses are deducted from effective gross income, which is total rank collected this is

Net income

Capitalization rate

Effective gross income

Net income is the income remaining after operating expenses and vacancy or collection losses are deductive from rent collect collected

The capitalization rate or cap rate is the rate of return and investor wants to receive or that the property is producing

True or false

True

What is the capitalization method Formula

IRV

income= Value x RATE

USE THE TEA FORMULA

And the capitalization method trying to find the formula the income is always the net operating income

The net operating income is

Gross income - expenses

Gross income multiplier used to estimate the values of small income properties, such as a duplex or triplex

This is using the income approach, gross rent multiplier CRM

True or false

True

This expresses the relationship between the anticipated monthly or annual rental income, plus the value it does not take into account any expenses, vacancies, or credit losses

Capitalization method

Income approach/gross multiplier

Comparison approach

Gross Rent multiplier

Estimating the property value using GRM what is the formula?

Value= Gross income(RENT) x GRM

An appraisal divides the price of comp properties by each comparable property’s gross income (rent)

What is the formula?

GRM= Sales price of comps / Rent

Appraisal approach review:

Comparison approach is known as

Cost approach is known as

Income approach is known as

Comparison approach is known as market data or direct sales comparison

Cost approach is known as summation

Income approach is known as Capitalization

Real estate investments that generate regular income for rental is called

In income producing properties

What kind of documentation is needed for income producing properties?

Income and expense statements, tax returns rent roles, utility bills maintenance records currently use Social Security deposit

Disclosures on income producing properties are

Zoning restrictions of environmental issues, pending litigations required license permits, and outstanding liens and covers in all material defects

The projective rent If 100% occupied and rent collected a.k.a. potential gross income is also known as

Gross scheduled income

Units not rented are

Vacancies

Rent owed, but not collected is called

Credit losses

Operating expense

Debt service

Credit losses are rent owed, but not collected

Effective gross income or adjusted gross income is the actual income after deducting vacancy and credit losses from the growth scheduled income, true or false

True

Under operating expenses, where are the difference between fixed cost and variable cost?

Under operating expenses

Fixed costs are insurance and salaries

Variable cost are utilities and maintenance

This does not include debt services, depreciation, income tax, or improvement

Income remaining after operating expenses have been deducted from effective gross income is called

NOI

Net operating income is the income remaining after operating expenses have been deducted from effective gross

Principal and interest payments on the loan are called

Debt service

Operating expense

Credit loss

Debt service is the principal and interest payments on their loan

The amount remaining after paying all operating expenses debt services, but before taking an account any income tax effect

Net operating income

Operating expense

Cash flow before Income tax

Cash flow before income tax is the amount remaining after paying all operating expenses and debt services but before taking an income tax effect

DCR Commercial debt coverage ratio is the ratio of net income available from commercial properties to service the mortgage payment

DCR= net income/annual principal & interest (PI) payment

Lenders want the DCR to be above what

Lenders want the commercial debt coverage ratio to be over 1.00

Capital gain income is income from

Capital gain income is in income from sale of an asset

Short-term capital gain versus long-term capital gain

Short-term capital gain is the sale of asset held for one year or less- Taxed as ordinary

Long-term capital game is the sale of an asset held for more than one year- Taxed as a flat rate

Any type of income received by an entity, such as an LLC that is not taxed at the level of an entity, but passes through to be taxed at a level of individuals in the entity

Ordinary

Capital gain income

Pass-through income

Pass-through and income as any type of income received by an entity, like an LLC that’s not taxed at the level of the entity, but it’s passed through to be taxed at the level of the individuals inside of the entity

Real property, taxes, and other taxes up to a max of what may be taken as a deduction on the person’s tax return

Real property taxes, another taxes up to a max of $10,000 may be taken as a deduction on a person’s tax return

Interest on loans up to loan amount of $750,000 that’s used to purchase or improve a property may be deducted

However, interest on home equity loans are not deduct

True or false

True

CAA Clean Air act requires EPA to develop

Air quality standards for existing pollutions and established air standards for new sources of pollution

CWA clean water act is a regulatory structure for discharging of pollutants into waterways

True or false

True

Comprehensive environmental response, compensation and liability act CERCLA Addresses uncontrolled or abandoned hazardous display sites

True or false

Dre

SARA Super fund amendments re-authorization act Stresses the need for permanent remedies, along with development and use of new treatments tech for a waste to clean up

T of F

True

Capital gain exclusion on sale principal residence

And a sale of a personal residence capital gains will be excluded from being taxed up to

$____ Single taxpayer

$____ Married couple couples filing jointly

Capital gain exclusion for sale principal residence

A sales personal residence capital gains will be excluded from being taxed up to $250,000 of gain for a single tax

500,000 of gain for married couples filing jointly

To qualify for exclusion, the resident must have been owner occupied as a principal resident for at least two out of the five years prior to sale

To qualify for exclusion on capital gain of sale of a principal residence, the resident must have Been owner occupied as principal resident for at least how many of the last five years prior to sale

To qualify for exclusion, the resident must have been owner occupied as a principal residence for at least two of the last five years prior to sale

Real estate investments, allow owners to shelter income through the use of allowable deductions on investment properties

True or false

True